Improvisations

One of the challenges to successful management or process innovation in an existing business is the array of organizational structures that are designed to keep current processes running smoothly – and, as a result, may resist changes.  In a recent blog post on The Wall Street Journal site, management thinker Gary Hamel offers a case study about an employee empowerment initiative at The Bank of New Zealand that illustrates this point well.

Hamel describes how, when the bank’s general manager for retail banking allowed one bank branch to set its own hours, word spread to other branches — and other managers soon also wanted to set their own branch opening and closing hours, to suit the needs of local markets. The general manager agreed to give the branch managers that freedom.

The challenge?  At headquarters, this change in policy resulted in concerns from HR, risk management, IT and corporate marketing. “While many of the objections [from headquarters functions] were more political than practical, some were well-grounded and soon led to policy adjustments,”  Hamel observes.  For example, to avoid objections from the bank’s union, branch managers were required to get employees’ agreement before changing a branch’s opening hours.

Hamel’s post is well worth reading, and it contains an implicit lesson for would-be management innovators in established companies: Keep in mind that, if you unleash change, institutional forces may resist it — and you may need to compromise with them and work with them.

Think successful product or technological innovation is hard? Successful management innovation is even more difficult, according to Julian Birkinshaw, a professor at the London Business School and cofounder of MLab, that school’s Management Laboratory.

“It’s much harder to do management innovation, because with management innovation, what you’re doing is you’re starting with an old set of [mangement] structures and principles, which are often a hundred years old — which even the people who are running them today don’t understand the origins of,” Birkinshaw observed in a recent London Business School podcast interview. As a result, he explained, most successful management innovators are typically start-up companies — because they can start anew.

In an established company, the task of changing the way the organization does work is more challenging and risky than in start-ups. “Many people…are so sort of stuck in tradition; the whole language of top-down and bureaucracy and hierarchy is so much the world that we know that we can’t begin to experiment” and try other ways, Birkinshaw said.

To be sure, Birkinshaw is trying to change that. In an article in the Winter 2009 issue of MIT Sloan Management Review,  Birkinshaw and Jules Goddard present a framework for thinking about your organization’s management model — depending on how the company approaches managing objectives, enabling individual motivation, coordinating activities and making decisions.  An earlier MIT Sloan Management Review article, by Birkinshaw and Michael Mol, looked at how management innovation happens.

Here’s an intriguing finding from a new working paper:  Companies that use modern management best practices tend to also use less energy. A team of researchers from Stanford, the London School of Economics and Cambridge University studied a sample of mid-sized manufacturing companies in the U.K. The researchers surveyed plant managers about 18 management practices, ranging from process improvement procedures to methods for attracting and retaining workers.  The research team then matched those responses to information from a U.K. business census about firms’ output and energy usage.  The authors’ conclusion? “Better managed firms are less energy intensive…. We demonstrate that the best managed firms are not only more productive, but also more effficient consumers of energy.”

One possible explanation? One of the best practices the researchers asked about was adoption of “lean” manufacturing methods — and lean manufacturing focuses on reducing waste of materials and energy. If so, the authors note, improving management processes at manufacturing companies could help lower greenhouse gas emissions.

However, the authors caution that their data doesn’t demonstrate causality between modern management practices and lower energy use – and some other factor could be at work. For example, they note, it could be that some companies hire management consultants who both improve management methods and reduce energy consumption.

The Economist this week highlights Lenovo, the Chinese computer company that some years back bought IBM’s PC business, as an example of the new era of business innovation emerging from developing economies. One interesting fact about Lenovo, The Economist notes, is that the  company has become so globally oriented that no longer has a corporate headquarters; instead, the company rotates its senior management meetings among various offices around the globe.

Could the company-without-a-country model be a wave of the future? Well-known scholar C.K. Prahalad of the University of Michigan’s Ross School of Business (and author of the influential book The Fortune at the Bottom of the Pyramid), apparently thinks so. In an article last spring for Strategy+Business, Prahalad and coauthor Hrishikesh Bhattacharyya articulate a model of a company that, rather than having one central headquarters, has “twenty hubs and no HQ.”  Such a company, the authors suggest, would be ”the modern version of an empire on which the sun never sets.”

Pixar has an impressive record of producing hit movies – from Toy Story to Finding Nemo to WALL-E.  In the September issue of the Harvard Business Review, Ed Catmull, cofounder and president of Pixar, describes the corporate culture that helps the studio stay creative.  The article is full of interesting ideas for managers seeking to build a culture of innovation and creativity. Among them:

• Community. Catmull stresses the importance of building a sense of community, where talented people trust each other and can work well together.
• Candid feedback. Catmull explains that Pixar has a system where a director-producer team can call on a ”brain trust” of other directors to review their work in progress and discuss it  – but the movie director and his or her team can decide what, if anything, they do with the feedback they get, and the “brain trust” members providing the reviews have no authority to impose their feedback. That Catmull writes, frees up the directors to ask for help and to consider the advice thoughtfully.
• Making connections. The company has mechanisms to encourage interaction between people; its in-house Pixar University includes not only business-related courses but also classes like yoga that can bring people from different disciplines together. And Pixar’s building is designed to deliberately encourage chance interactions between people: The building is centered around an atreum that houses meeting rooms, bathrooms and the cafeteria.

An interesting cover story in the June 2008 issue of Inc. magazine names a T-shirt company called Threadless “the most innovative small company in America.” Why? Chicago-based Threadless uses “crowdsourcing” to choose its T-shirt designs, with participants in its online community submitting designs in the company’s competitions and then voting to choose the winning ones. The result: A very profitable company whose growth rate was more than 200% in 2007. As Inc. notes, Threadless was featured in a 2006 article in the MIT Sloan Management Review .